May’s halving will reduce the amount of Bitcoin rewarded to miners, and in turn, increase the coin’s scarcity.
Considering this scarcity – think supply and demand – as well as historical data of the previous two halvings, Bitcoin’s price may see a remarkable bump in the months following the event.
Halving Historically Leads to Massive Gains
The so-called “halving,” a 50% block reward cut to production rate, is a mechanism programmed into the Bitcoin blockchain that occurs roughly every four years (or 210,000 blocks).
As reported by investment firm and Bitcoin supporter VanEck, historically, given the increased scarcity, the price of Bitcoin has shot-up following halving over the course of the coin’s lifecycle.
At the time of the first halving, November 28, 2012, Bitcoin’s price was $12.22; by the end of November 2013, the leading cryptocurrency had shot up to $1,242.
At the second halving, July 9, 2016, Bitcoin’s price was $652.14; just 16 months later, on Dec 17, 2017, the coin hit an all-time-high of almost $20,000.
Looking at this historical data alone, the upcoming halving could be a momentous occasion for Bitcoin enthusiasts and the cryptosphere as a whole.
German bank Bayern LB went further, predicting a price of $90,000 after May 2020.
Public interest in the digital asset is growing too.
Google measures search interest over time based on a score out of 100. As January comes to a close, the score sits at 97. This is double December 2019’s score of 48.
There was only one other time that the search volume for “Bitcoin halving” was higher than today, at the time of the second halving in the summer of 2016.
Bitcoin Enhances Portfolio Return
As illustrated, this increase in scarcity – and in turn value of the coin brought on by halving – is one of the drivers for historical Bitcoin growth.
Considering this, VanEck highlights in their report how the coin can increase portfolio diversification because of its low correlation to traditional asset classes, including broad market equity indices, bonds, and gold.
According to their research, a small allocation to Bitcoin significantly enhanced the cumulative return of a 60% equity and 40% bonds portfolio allocation mix while only minimally impacting its volatility.
The graph below illustrates this with allocations of 0.5% BTC, 1% BTC, and 3% BTC:
Last year, the price of the leading cryptocurrency gained about 90%, outshining all other major asset classes.
With an ever-growing community of enthusiasts, an influx of institutional investors, and anticipation surround the upcoming halving, 2020 is set to be a big year.
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